TRG | The Bottom Line – 6/21

TRG hosted Alta Equipment Group (ALTG) for our monthly fireside chat series in June this week. Alta is one of the more unique companies in our coverage, as a full-service dealer of equipment to the industrial and construction markets. This model has attractive qualities, the primary one being that Alta sells a piece of equipment (high 1x sale event at low-margin), but then provides parts and services (recurring small-ticket at high-margin) to keep that equipment running for the next 10+ years. The ole razor and blade trick. The franchise dealer model gives Alta exclusive access to its territories. This brings embedded organic growth and cash flows, though it is somewhat obscured by the rental business in the financial statements. Not only is the organic business a resilient one, but Alta is an experienced acquiror of dealers and the industry is large and fragmented. We believe acquisitions will add to the earnings power in the years to come. On the fireside chat, management dissected the model and its advantages well. The stock has pulled back meaningfully and we believe it creates a compelling buying opportunity for investors.